Beer prices set to rise as barley supplies tighten

Dismal harvests for barley are set to drive up the price of malt, analysts say, and that will likely translate into more expensive brews at your local pub and beer store.

Canada is the world’s largest barley exporter, but a wet growing season in the West last summer resulted in a poor harvest. Meanwhile, massive flooding wiped out much of the barley crop in Australia, the world’s second-largest supplier.

While both countries managed to produce a harvest, much of the grain has been unsuitable to turn into malt, the barley product that’s used in beer.

Exporters expect the shortfall in the barley supply will last until at least the fall, and that will cause beer prices to foam up by next year.

The good news is that most of the biggest North American brewers have contracts with the Canadian Wheat Board, the monopoly seller of Western Canada’s malt barley. So their prices are already locked in for a while.

But analysts say barley prices are unlikely to ease soon, meaning that even if the big brewers can absorb the higher prices this year, they may not be able to next year.

“(Crop) prices will stay very high probably much of 2012,” Michael Micovcin, Great Western Brewing’s chief executives, told Reuters.